BEIJING: China's pledge to buy more Spanish government debt reflects its strategic and economic interests, but its big spending in Europe will not be a cure-all for the long term, experts said Wednesday. Vice Premier Li Keqiang made the promise this week during a three-day visit to Spain, amid concerns that the European Union's fifth-largest economy may need an Irish or Greek-style international rescue. Experts said Li's vow made investment sense for China, which already has significant holdings of euro-backed assets, and would boost the country's image on the global stage - but it would not resolve the protracted debt crisis. "Europe's problems are deeply structural in nature and are not something that China will necessarily be able to solve," Mark Williams, a senior economist at London-based research firm Capital Economics, said. "It can paper over the cracks perhaps for a few weeks but it can't solve them." Credit Suisse economist Tao Dong said that stabilising the economy in the EU - the top destination for China's exports - was in the interest of the Asian country, which still largely depends on shipments to drive economic growth. "Strategically, it is also important for China to strengthen the relationship with Europe," Tao said. Li - on a European tour that will also include Britain and Germany - said China, as a long-term and responsible player in the Spanish government bonds market, has not reduced its holdings, and even increased its buying activities amid European debt concerns. "We will buy more (Spanish government bonds) depending on market conditions," he was quoted by the official Xinhua news agency as saying. While China's top leaders were not seeking to single-handedly resolve the debt crisis, the investment in Spanish debt made sense, said Ken Peng, a Beijing-based economist for Citigroup. Spanish bonds "are yielding 12 percent so I think it might not be a bad investment," Peng said. Saddled with heavy debt and huge public deficits, countries such as Spain, Portugal and Greece have been forced to offer higher interest rates to attract investors to their sovereign bonds. Beijing has the world's largest foreign exchange reserves at $2.648 trillion, with a large chunk - nearly $907 billion- parked in low-yielding US Treasuries but a growing portion invested in euro assets. IHS Global Insight economist Alistair Thornton said Li's comments would provide a "little confidence boost" to European markets but would not dramatically change the state of play for the Spanish economy. "A vote of confidence in a troubled economy is never a bad thing, but it is more likely to reduce the downside risk, rather than really helping on the upside," Thornton said. Exact figures on the size of China's euro holdings are hard to find, but analysts estimate its stockpile of bonds from debt-laden states is relatively small, with most holdings in large countries. – Agence France
